The Importance of Title Insurance. An Owner's Title Insurance Policy is your best protection against potential defects that can remain hidden despite the most thorough search of public records. A Lender's Title Insurance Policy also exists to protect your mortgage lender's interest.

The required insurance protects the lender up to the amount of the mortgage, but it doesn't protect your equity in the property. For that you need an owner's title policy for the full value of the home. In many areas, sellers pay for owner policies as part of their obligation to deliver good title to the buyer.

The lender's policy of title insurance lasts until the mortgage is paid in full. An owner's policy of title insurance lasts for as long as you or your heirs retain an interest in the property.

The average title insurance policy carries a one-time premium of about $1,000, which covers all upfront work and ongoing legal and loss coverage. However, premiums vary substantially, ranging from as little as a few hundred dollars to more than $2,000.

Paying cash for a property can speed up the transaction process and can eliminate a number of closing costs, including the expense of purchasing title insurance. Generally, title insurance is a requirement for a buyer when lender financing is involved and is only optional -- but often recommended -- when it isn't.

The only time you can purchase insurance is at closing. Whether buyer, seller or both pay for the coverage varies according to local custom. In some areas, the seller buys the owner's policy and the buyer pays for the lender's policy.